If you want to cut the cost of your insurance, it can help to know the
assumptions insurers use when setting premiums. We explain how they work
anbd highlight other quirks of cover.

Insurance companies now analyse huge volumes of data to spot which customers are most likely to claim on a policy. But this numbercrunching can throw up some unexpected results. Below, we uncover some of the more unusual quirks, and explain how you can use them to your advantage.

There's no such thing as a "no-fault" claim

If you make a claim on your car insurance, expect to see next year's premium rise - even if you weren't to blame for the incident. When settling a claim insurers will deem one side "at fault" and therefore liable for costs. But the reality is both drivers will be rated higher risk in future.

Research by the AA found more than a third of insurers will raise premiums after one "non-fault" claim, with 5pc raising premiums by 30pc. If you have two non-fault accidents the majority of insurers will push premiums up by between 10pc and 50pc, with one insurer adding 300pc "loadings".

Ian Crowder of the AA said: "It is startling to find that some insurers are prepared to apply such high loadings." The AA applies no premium increase after one non-fault accident, and 8pc after two.

Mr Crowder added: "There is statistical evidence that shows those who have suffered a no-fault accident are more likely to go on to make a fault claim." He said this may be because poor driving habits can contribute to a non-fault accident, for example driving too fast then braking suddenly at traffic lights, or a roundabout, causing another driver to shunt you.

If you've had a no-fault claim, make sure you shop around as not all insurers raise prices (and some will for certain risks, but not others). If you're involved in a second, or third incident, it may be cheaper to pay for minor repairs yourself rather than pay the higher cost of insurance.

Add an extra driver and cut insurance bills

Insurers assume those who are married or in a long-term relationship are safer drivers - perhaps because they are more likely to be curled up on the sofa watching television at night, rather than haring around in a car.

As a result, a driver with a "joint" car insurance policy will pay around £100 less than a single person of the same age.

But you don't have to tie the knot to make the most of this quirk. If you are in a relationship, but drive your own car, put your partner down as a "named driver". Even "naming" a close friend, or parent can reduce costs, provided they don't have previous driving convictions.

Research by Moneysupermarket.com found that a single person in their 30s pays an average of £430 for car insurance; while a driver who has a named partner on the policy pays an average of £316. For those in their 40s, the price falls from £320 to £228, while those in their 50s and early 60s will see prices fall from £250 to £177.

Kevin Pratt, an insurance expert at Moneysupermarket.com, said: "You don't need to be living at the same address to benefit, although if you are this is likely to be a more significant saving."

'Fully comp' cheaper than third party cover

This is another example of how you can pay less for more cover, although this wrinkle only applies to younger drivers.

Fully comprehensive insurance covers both your own car, and the cost of damage to another. But third party cover only applies to damage to other vehicles (and people). Surprisingly, it is the more expensive option for drivers under 40.

Mr Pratt explained: "Many younger drivers, particularly those with lower value vehicles, opt for third party cover, as it used to be cheaper." As a result the number of claims on these type of policies rose.

"Insurers now take the view that drivers opting for these policies are a greater risk." In other words, premiums are higher because insurers assume drivers opting for third party cover are more inexperienced and reckless.

Mr Crowder added: "Far more insurers offer comprehensive cover, so this is a more competitive market. Only about 10pc of the policies sold are for third party cover, and most of these are to younger drivers, so it is not hard to see why this has become a more expensive option."

Figures from Moneysupermarket.com show that a 20-year-old can save an average of £326 a year by opting for "fully comp" cover, but by the age of 25 the saving is just £49 a year.

Motorists aged 40 or over pay on average the same, regardless of the policy type.

Make use of this quirk while you can. If all younger drivers opted for fully comprehensive cover, this differential would no longer exist - and the cost of fully comp cover for this age group will increase.

Worldwide travel cover that isn't global

Thanks to a 40-year-old trade embargo, American insurers assume you won't be going to Cuba for your holidays, as they can't legally cover you for travel to the island.

This also affects UK holidaymakers who have "worldwide" travel insurance with Boots, Yorkshire or Clydesdale Bank, WH Smith or Direct Travel. All are underwritten by AIG, a US company which enforces the ban.

The exclusion is clearly stated in the policy documents, but could be overlooked by those who have annual policies, or insurance that's part of a packaged bank account or credit card deal. Caroline Lloyd, travel expert at GoCompare.com, said: "Before you jet off it's important to check your policy documents carefully for any manner of exclusion."

Hidden cost of spreading insurance payments

It's known that insurers charge interest if you opt to pay premiums monthly, rather than in one upfront payment. But did you know insurers will charge higher interest payments to those deemed more risky drivers? Research by Moneysupermarket.com found that the APR charged to customers varied if they changed their job, their address, or the type of car insured. These interest rates vary from 20pc to more than 40pc. Those looking to pay by instalments should ensure they take into account these costs when comparing insurance prices.

Becoming a safer driver can push up your premiums

Penalty points on your licence, for speeding or other driving offences, push up your car insurance premiums significantly. But those who opt instead to attend a "speed awareness course", designed to make you a more responsible driver, can also face in an increase.

The Admiral Insurance group now asks drivers whether they have attended such a course. The company said this is likely to have "an adverse effect" on premiums, as there was statistical evidence that those attending these courses were more likely to claim on their insurance in future.

Mr Crowder said: "There is no central database of which drivers have attended such courses. But if the insurer asks you have to give an honest answer, otherwise you could invalidate your insurance." Not all insurers ask, so if you've attended a course do shop around for cover, as it's still better than accepting the points.